SEC Filing | SL Green Realty Corp.

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ROPL-2014.12.31-10K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________________________________

FORM 10-K



ý		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number: 033-84580

RECKSON OPERATING PARTNERSHIP, L.P.

(Exact name of registrant as specified in its charter)

______________________________________________________________________



Delaware (State or other jurisdiction of incorporation or organization)		11-3233647 (I.R.S. Employer Identification No.)

420 Lexington Avenue, New York, NY 10170

(Address of principal executive offices—Zip Code)

(212) 594-2700

(Registrant's telephone number, including area code)

______________________________________________________________________

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ý

As of March 13, 2015, no common units of limited partnership of the Registrant were held by non-affiliates of the Registrant. There is no established trading market for such units.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Definitive Proxy Statement of SL Green Realty Corp., the indirect parent of the Registrant, for its 2015 Annual Meeting of Stockholders to be filed within 120 days after the end of the Registrant's fiscal year are incorporated by reference into Part III of this Annual Report on Form 10-K.

Reckson Operating Partnership, L.P.

TABLE OF CONTENTS



PART I
1.	Business	2
1A.	Risk Factors	4
1B.	Unresolved Staff Comments	12
2	Properties	13
3	Legal Proceedings	17
4	Mine Safety Disclosures	17
PART II
5	Market for Registrant's Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities	18
6	Selected Financial Data	19
7	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
7A.	Quantitative and Qualitative Disclosures about Market Risk	33
8	Financial Statements and Supplementary Data	34
9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	65
9A.	Controls and Procedures	65
9B.	Other Information	65
PART III
10	Directors, Executive Officers and Corporate Governance	66
11	Executive Compensation	66
12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	66
13	Certain Relationships and Related Transactions, and Director Independence	66
14	Principal Accounting Fees and Services	66
PART IV
15	Exhibits, Financial Statements and Schedules	67

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PART I

ITEM 1. BUSINESS

General

ROP is engaged in the acquisition, ownership, management and operation of commercial and residential real estate properties, principally office properties, and also owns land for future development, located in New York City, Westchester County, Connecticut and New Jersey, which collectively is also known as the New York Metropolitan area.

SL Green Realty Corp., or SL Green, and the Operating Partnership were formed in June 1997. SL Green has qualified, and expects to qualify in the current fiscal year as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, or the Code, and operates as a self-administered, self-managed REIT. A REIT is a legal entity that holds real estate interests and, through payments of dividends to stockholders, is permitted to minimize the payment of Federal income taxes at the corporate level. Unless the context requires otherwise, all references to "we," "our," "us" and the "Company" means ROP and all entities owned or controlled by ROP.

On January 25, 2007, SL Green completed the acquisition of all of the outstanding shares of common stock of Reckson Associates Realty Corp., or RARC, the prior general partner of ROP. This transaction is referred to herein as the Merger.

In connection with the closing of our 2012 credit facility, in which we, along with SL Green and the Operating Partnership are borrowers, SL Green transferred three properties with total assets aggregating to $320.2 million at December 31, 2012. During 2014, SL Green transferred an additional five properties with total assets aggregating to $884.3 million to ROP. Under the Business Combinations guidance (Accounting Standard Codification 805-50), these transfers were determined to be transfers of businesses between the indirect parent company and its wholly-owned subsidiary. As such, the assets and liabilities were transferred at their carrying value and were recorded as of the beginning of the current reporting period as though the assets and liabilities had been transferred at that date. The consolidated financial statements and financial information presented for all prior years have been retrospectively adjusted to furnish comparative information.

On September 30, 2012, SL Green transferred $324.9 million of preferred equity investments to ROP, one of which was subject to a secured $50.0 million loan. Under the Business Combinations guidance (Accounting Standard Codification 805-50), these transfers were determined to be transfers of assets between the indirect parent company and its wholly-owned subsidiary. As such, the assets were transferred at their carrying value and accounted for prospectively from the date of transfer.

As of December 31, 2014, we owned the following commercial and residential properties in the New York Metropolitan area, primarily in midtown Manhattan. Our investments in the New York Metropolitan area also include investments in Brooklyn, Westchester County, Connecticut and New Jersey, which are collectively known as the Suburban properties:



Location	Type	Number of Buildings	Approximate Square Feet	Weighted Average Occupancy⁽¹⁾
Commercial:
Manhattan	Office	13	7,611,645	92.8	%
	Retail⁽²⁾	5	352,892	98.4	%
	Redevelopment	1	104,000	72.5	%
	Fee Interest	1	176,530	100.0	%
		20	8,245,067	92.9	%
Suburban	Office	20	3,417,900	80.5	%
Total commercial properties		40	11,662,967	89.3	%
Residential:
Manhattan	Residential⁽²⁾	—	222,855	95.8	%
Total portfolio		40	11,885,822	89.4	%

____________________________________________________________________


(1)	The weighted average occupancy represents the total leased square feet divided by total available rentable square feet.


(2)	As of December 31, 2014, we owned a building that was comprised of approximately 270,132 square feet of retail space and approximately 222,855 square feet of residential space. For the purpose of this report, we have included the building as part of retail properties and have shown the square footage under its respective classifications.

As of December 31, 2014, we also held preferred equity and other investments with a book value of $173.2 million.

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Our corporate offices are located in midtown Manhattan at 420 Lexington Avenue, New York, New York 10170. As of December 31, 2014, SL Green's corporate staff, inclusive of our staff, consisted of 279 persons, including 179 professionals experienced in all aspects of commercial real estate. We can be contacted at (212) 594-2700. Our indirect parent entity, SL Green, maintains a website at www.slgreen.com. On this website, you can obtain, free of charge, a copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we file such material electronically with, or furnish it to, the Securities and Exchange Commission, or the SEC. SL Green has also made available on its website its audit committee charter, compensation committee charter, nominating and corporate governance committee charter, code of business conduct and ethics and corporate governance principles. We do not intend for information contained on SL Green's website to be part of this annual report on Form 10-K. You can also read and copy any materials we file with the SEC at its Public Reference Room at 100 F Street, NE, Washington, DC 20549 (1-800-SEC-0330). The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

Business and Growth Strategies

See Item 1 "Business—Business and Growth Strategies" in SL Green and the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 2014 for a complete description of SL Green's business and growth strategies.

Competition

See Item 1 "Business—Competition" in SL Green and the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 2014 for a complete description of SL Green's competition.

Manhattan Office Market Overview

See Item 1 "Business—Manhattan Office Market Overview" in SL Green and the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 2014 for a complete description of SL Green's Manhattan office market overview.

Industry Segments

See Item 1 "Business—Industry Segments" in SL Green and the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 2014 for a complete description of SL Green's industry segments.

Employees

See Item 1 "Business—Employees" in SL Green and the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 2014 for a complete description of SL Green's employees.

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ITEM 1A. RISK FACTORS

We encourage you to read "Item 1A—Risk Factors" in SL Green and the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 2014.

Declines in the demand for office space in New York City, and in particular midtown Manhattan, as well as our Suburban markets, including Westchester County, Connecticut and New Jersey, could adversely affect the value of our real estate portfolio and our results of operations and, consequently, our ability to service current obligations and make distributions to SL Green.

The majority of our property holdings are comprised of commercial office properties located in midtown Manhattan. Our property holdings also include a number of retail properties and a multifamily residential property. As a result, our business is dependent on the condition of the New York City economy in general and the market for office space in midtown Manhattan in particular. Future weakness and uncertainty in the New York City economy could materially reduce the value of our real estate portfolio and our rental revenues, and thus adversely affect our cash flow and our ability to service current debt and make distributions to SL Green. Similarly, future weakness and uncertainty in our suburban markets could adversely affect our cash flow and our ability to service current debt and to make distributions to SL Green.

We may be unable to renew leases or relet space as leases expire.

When our tenants decide not to renew their leases upon their expiration, we may not be able to relet the space. Even if tenants do renew or we can relet the space, the terms of renewal or reletting, taking into account among other things, the cost of improvements to the property and leasing commissions, may be less favorable than the terms in the expired leases. As of December 31, 2014, approximately 3.5 million square feet, representing approximately 35.8% of the rentable square feet, are scheduled to expire by December 31, 2019 at our properties. As of December 31, 2014, these leases had annualized escalated rent totaling $200.8 million. We also have leases with termination options beyond 2019. In addition, changes in space utilization by our tenants may impact our ability to renew or relet space without the need to incur substantial costs in renovating or redesigning the internal configuration of the relevant property. If we are unable to promptly renew the leases or relet the space at similar rates or if we incur substantial costs in renewing or reletting the space, our cash flow and ability to service debt obligations and make distributions to SL Green could be adversely affected.

We face significant competition for tenants.

The leasing of real estate is highly competitive. The principal means of competition are rent, location, services provided and the nature and condition of the facility to be leased. We directly compete with all owners, developers and operators of similar space in the areas in which our properties are located.

Our commercial office properties are concentrated in highly developed areas of midtown Manhattan and certain Suburban central business districts, or CBDs. Manhattan is the largest office market in the United States. The number of competitive office properties in Manhattan and CBDs in which our Suburban properties are located, which may be newer or better located than our properties, could have a material adverse effect on our ability to lease office space at our properties, and on the effective rents we are able to charge.

The expiration of long term leases or operating sublease interests where we do not own a fee interest in the land could adversely affect our results of operations.

Our interests in 461 Fifth Avenue, 625 Madison Avenue and 1185 Avenue of the Americas, all in Manhattan, and 1055 Washington Boulevard, Stamford, Connecticut, are comprised of long-term leaseholds in the land and the improvements, rather than by ownership of a fee interest in the land. We have the ability to acquire the fee position at 461 Fifth Avenue for a fixed price on a specific date.

The average remaining term of these long-term leases as of December 31, 2014, including our unilateral extension rights on each of the properties, is 36 years. Pursuant to the leasehold arrangements, we perform the functions traditionally performed by landlords with respect to our subtenants. We are responsible for not only collecting rent from our subtenants, but also maintaining the property and paying expenses relating to the property. Our share of annualized cash rents of office properties held through long-term leases or operating sublease interests at December 31, 2014 totaled $157.5 million, or 31.3%, of our share of total annualized cash rent for office properties. Unless we purchase a fee interest in the underlying land or extend the terms of these leases prior to their expiration, we will lose our right to operate these properties upon expiration of the leases, which could adversely affect our financial condition and results of operations.

Adverse economic and geopolitical conditions in general and the commercial office markets in the New York Metropolitan area in particular could have a material adverse effect on our results of operations and financial condition and, consequently, our ability to service debt obligations and make distributions to SL Green.

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Our business may be affected by volatility in the financial and credit markets and other market or economic challenges experienced by the U.S. economy or real estate industry as a whole. Future periods of economic weakness could result in reduced access to credit and/or wider credit spreads. Economic uncertainty, including concern about the growth prospects and the stability of the markets generally may lead many lenders and institutional investors to reduce, and in some cases, cease to provide funding to borrowers, which could adversely affect our liquidity and financial condition, and the liquidity and financial condition of our tenants. Our business may also be adversely affected by local economic conditions, as substantially all of our revenues are derived from our properties located in the New York Metropolitan area, particularly in Manhattan, Westchester County, Connecticut and New Jersey. Because our portfolio consists primarily of commercial office buildings, located principally in midtown Manhattan, as compared to a more diversified real estate portfolio, if economic conditions deteriorate, then our results of operations, financial condition and ability to service current debt and to make distributions to SL Green may be adversely affected. Specifically, our business may be affected by the following conditions:


•	significant job losses in the financial and professional services industries which may decrease demand for our office space, causing market rental rates and property values to be negatively impacted;

•

our ability to borrow on terms and conditions that we find acceptable may be limited, including as a result of increased credit risk premiums for certain market participants, which could reduce our ability to pursue acquisition and development opportunities and refinance existing debt, reduce our returns from both our existing operations and our acquisition and development activities and increase our future interest expense; and


•	reduced values of our properties, which may limit our ability to dispose of assets at attractive prices or to obtain debt financing secured by our properties and may reduce the availability of unsecured loans.

We rely on five large properties for a significant portion of our revenue.

As of December 31, 2014, five of our properties, 1185 Avenue of the Americas, 1350 Avenue of the Americas, 919 Third Avenue, 625 Madison Avenue and 750 Third Avenue, accounted for 51.8% of our total annualized cash rent for office properties, and 1185 Avenue of the Americas alone accounted for 17.4% of our total annualized cash rent for office properties. Our revenue and cash available to service our debt obligations and to make distributions to SL Green would be materially adversely affected if the ground lease for the 1185 Avenue of the Americas property were terminated for any reason or if any of these properties were materially damaged or destroyed. Additionally, our revenue and cash available to service debt obligations and make distributions to SL Green would be materially adversely affected if tenants at these properties fail to timely make rental payments due to adverse financial conditions or otherwise, default under their leases or file for bankruptcy or become insolvent.

Our results of operations rely on major tenants and insolvency or bankruptcy of these or other tenants could adversely affect our results of operations.

Giving effect to leases in effect as of December 31, 2014 for properties, as of that date, our five largest tenants, based annualized cash rent, accounted for 17.5% of our share of total annualized cash rent for office properties, with three tenants, Ralph Lauren Corporation, Debevoise & Plimpton, LLP and News America Incorporated, accounting for 4.7%, 4.4% and 3.0% of our share of total annualized cash rent for office properties, respectively. Our business and results of operations would be adversely affected if any of our major tenants became insolvent, declared bankruptcy, or otherwise refused to pay rent in a timely manner or at all. In addition, if current conditions in the industries in which our tenants are concentrated deteriorate, we may experience increases in past due accounts, defaults, lower occupancy and reduced effective rents across tenants in such industries, which would in turn have an adverse effect on our business and results of operations.

We may suffer adverse consequences if our revenues decline since our operating costs do not necessarily decline in proportion to our revenue.

We earn a significant portion of our income from renting our properties. Our operating costs, however, do not necessarily fluctuate in direct proportion to changes in our rental revenue. As a result, our costs will not necessarily decline even if our revenues do. In such event, we may be forced to borrow to cover our costs, we may incur losses or we may not have cash available to service our debt obligations and make distributions to SL Green.

We face risks associated with property acquisitions.

We may acquire interests in properties, individual properties and portfolios of properties, including large portfolios that could significantly increase our size and alter our capital structure. Our acquisition activities may be exposed to, and their success may be adversely affected by, the following risks:


•	we may be unable to meet required closing conditions;


•	we may be unable to finance acquisitions and developments of properties on favorable terms or at all;

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•	we may be unable to lease our acquired properties on the same terms or to the same level of occupancy as our existing properties;


•	acquired properties may fail to perform as we expected;


•	we may expend funds on, and devote management time to, acquisition opportunities which we do not complete, which may include non-refundable deposits;


•	our estimates of the costs we incur in renovating, improving, developing or redeveloping acquired properties may be inaccurate;


•	we may not be able to obtain adequate insurance coverage for acquired properties;


•	acquired properties may be located in new markets where we may face risks associated with a lack of market knowledge or understanding of the local economy, lack of business relationships in the area and unfamiliarity with local governmental and permitting procedures and may increase the risks associated with concentration of clients and geographies; and


•	we may be unable to quickly and efficiently integrate new acquisitions and developments, particularly acquisitions of portfolios of properties, into our existing operations, and therefore our results of operations and financial condition could be adversely affected.

We may acquire properties subject to both known and unknown liabilities and without any recourse, or with only limited recourse to the seller. As a result, if a liability were asserted against us arising from our ownership of those properties, we might have to pay substantial sums to settle it, which could adversely affect our cash flow. Unknown liabilities with respect to properties acquired might include:


•	claims by tenants, vendors or other persons arising from dealing with the former owners of the properties;


•	liabilities incurred in the ordinary course of business;


•	claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties; and


•	liabilities for clean-up of undisclosed environmental contamination.

Competition for acquisitions may reduce the number of acquisition opportunities available to us and increase the costs of those acquisitions.

We plan to continue to acquire properties as we are presented with attractive opportunities. We may face competition for acquisition opportunities from other investors, particularly those investors who are willing to incur more leverage, and this competition may adversely affect us by subjecting us to the following risks:


•	an inability to acquire a desired property because of competition from other well-capitalized real estate investors, including publicly traded and privately held REITs, private real estate funds, domestic and foreign financial institutions, life insurance companies, sovereign wealth funds, pension trusts, partnerships and individual investors; and


•	an increase in the purchase price for such acquisition property.

If we are unable to successfully acquire additional properties, our ability to grow our business could be adversely affected. In addition, increases in the cost of acquisition opportunities could adversely affect our results of operations.

We are subject to risks that affect the retail environment.

Approximately 3.6% of our share of total annualized cash rent is generated by retail properties, principally in Manhattan. As a result, we are subject to risks that affect the retail environment generally, including the level of consumer spending, consumer confidence and levels of tourism in Manhattan. These factors could adversely affect the financial condition of our retail tenants and the willingness of retailers to lease space in our retail properties, which could in turn have an adverse effect on our business and results of operations.

The occurrence of a terrorist attack may adversely affect the value of our properties and our ability to generate cash flow.

Our operations are primarily concentrated in midtown Manhattan. In the aftermath of a terrorist attack or other acts of terrorism or war, tenants in the New York Metropolitan area may choose to relocate their business to less populated, lower-profile areas of the United States that those tenants believe are not as likely to be targets of future terrorist activity. In addition, economic activity could decline as a result of terrorist attacks or other acts of terrorism or war, or the perceived threat of such acts. Each of these impacts could in turn trigger a decrease in the demand for space in the New York Metropolitan area, which could increase vacancies in our properties and force us to lease our properties on less favorable terms. Furthermore, we may also experience

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increased costs in relation to security equipment and personnel. As a result, the value of our properties and our results of operations could materially decline.

Potential losses may not be covered by insurance.

ROP is insured through a program administered by SL Green. SL Green maintains "all-risk" property and rental value coverage (including coverage regarding the perils of flood, earthquake and terrorism) within three property insurance portfolios and liability insurance. This includes ROP assets. As of December 31, 2014, the first property portfolio maintains a blanket limit of $950.0 million per occurrence, including terrorism, for the majority of the New York City properties in our portfolio. The second portfolio maintains a limit of $700.0 million per occurrence, including terrorism, for several New York City properties and the majority of the Suburban properties. Both policies expire on December 31, 2015. Each policy includes $100.0 million of flood coverage, with a lower sublimit for locations in high hazard flood zones. A third blanket property policy covers most of SL Green's residential assets and maintains a limit of $380 million per occurrence, including terrorism, for our residential properties and expires January 31, 2016. SL Green maintains two liability policies which cover all our properties and provide limits of $201.0 million per occurrence and in the aggregate per location. The liability policies expire on October 31, 2015 and January 31, 2016 and cover our commercial and residential properties, respectively. Additional coverage may be purchased on a stand-alone basis for certain assets. Although we consider our insurance coverage to be appropriate, in the event of a major catastrophe, we may not have sufficient coverage to replace certain properties.

SL Green's wholly-owned taxable REIT subsidiary, Belmont Insurance Company, or Belmont, acts as a captive insurance company and as one of the elements of its overall insurance program. Belmont was formed in an effort to, among other reasons, stabilize to some extent the impact on us of fluctuations of insurance market conditions. Belmont is licensed in New York to write Terrorism, NBCR (nuclear, biological, chemical, and radiological), General Liability, Environmental Liability, Flood and D&O coverage. As long as SL Green owns Belmont, we are responsible for its liquidity and capital resources, and the accounts of Belmont are part of SL Green's consolidated financial statements. If we experience a loss and Belmont is required to pay a claim under our insurance policy, SL Green would ultimately record the loss to the extent of Belmont’s required payment. Belmont is not reinsured by a third-party. Therefore, insurance coverage provided by Belmont should not be considered as the equivalent of third-party insurance, but rather as a modified form of self-insurance.

The Terrorism Risk Insurance Act, or TRIA, which was enacted in November 2002, was renewed on December 31, 2005 and again on December 31, 2007. Congress extended TRIA, now called TRIPRA (Terrorism Risk Insurance Program Reauthorization and Extension Act of 2007) until December 31, 2014. TRIPRA was not renewed by Congress and expired on December 31, 2014. However, on January 12, 2015, TRIPRA was reauthorized until December 31, 2020 (Terrorism Insurance Program Reauthorization and Extension Act of 2015). The law extends the federal Terrorism Insurance Program that requires insurance companies to offer terrorism coverage and provides for compensation for insured losses resulting from acts of certified terrorism, subject to the current program trigger of $100.0 million, which will increase by $20 million per annum, commencing on December 31, 2015. There is no assurance that TRIPRA will be extended. Our debt instruments, consisting of a non-recourse mortgage note secured by one of our properties, our 2012 credit facility, senior unsecured notes and other corporate obligations, as well as ground leases, contain customary covenants requiring us to maintain insurance. Although we believe that we currently maintain sufficient insurance coverage to satisfy these obligations, there is no assurance that in the future we will be able to procure coverage at a reasonable cost. In such instances, there can be no assurance that the lenders or ground lessors under these instruments will not take the position that a total or partial exclusion from "all-risk" insurance coverage for losses due to, for example, terrorist acts is a breach of these debt and ground lease instruments allowing the lenders or ground lessors to declare an event of default and accelerate repayment of debt or recapture of ground lease positions. In addition, if lenders require greater coverage that we are unable to obtain at commercially reasonable rates, we may incur substantially higher insurance premiums or our ability to finance our properties and expand our portfolio may be adversely impacted.

Furthermore, with respect to certain of our properties, including properties held by joint ventures, or subject to triple net leases, insurance coverage is obtained by a third-party and we do not control the coverage. While we may have agreements with such third parties requiring them to maintain adequate coverage and we monitor these policies, such coverage ultimately may not be maintained or adequately cover our risk of loss. Additionally, we may have less protection than with respect to the properties where we obtain coverage directly.

In connection with this program we incurred insurance expense of approximately $6.1 million, $5.8 million and $5.3 million for the years ended December 31, 2014, 2013 and 2012, respectively.

We face possible risks associated with natural disasters and the physical effects of climate change.

We are subject to the risks associated with natural disasters and the physical effects of climate change, which can include storms, hurricanes and flooding, any of which could have a material adverse effect on our properties, operations and business. To the extent climate change causes changes in weather patterns, our markets could experience increases in storm intensity and rising sea-levels. Over time, these conditions could result in declining demand for office space in our buildings or the inability of us to

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operate the buildings at all. Climate change may also have indirect effects on our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable, increasing the cost of energy at our properties and requiring us to expend funds as we seek to repair and protect our properties against such risks. There can be no assurance that climate change will not have a material adverse effect on our properties, operations or business.

Leasing office space to smaller and growth-oriented businesses could adversely affect our cash flow and results of operations.

Some of the tenants in our properties are smaller, growth-oriented businesses that may not have the financial strength of larger corporate tenants. Smaller companies generally experience a higher rate of failure than large businesses. Growth-oriented firms may also seek other office space as they develop. Leasing office space to these companies could create a higher risk of tenant defaults, turnover and bankruptcies, which could adversely affect our cash flow and results of operations as well as our ability to make distributions to SL Green.

Debt financing, financial covenants, degree of leverage, and increases in interest rates could adversely affect our economic performance.

Scheduled debt payments could adversely affect our results of operations.

Cash flow could be insufficient to make distributions to SL Green and meet the payments of principal and interest required under our current mortgages and other indebtedness, including our 2012 credit facility, senior unsecured notes and debentures. We, SL Green, and the Operating Partnership are all borrowers jointly and severally obligated under the 2012 credit facility.

The total principal amount of our outstanding consolidated indebtedness was $2.8 billion as of December 31, 2014, consisting of $1.3 billion under our 2012 credit facility, which is inclusive of our $833.0 million term loan, $1.0 billion under our senior unsecured notes and $500.0 million of non-recourse mortgage note. In addition, we could increase the amount of our outstanding indebtedness in the future, in part by borrowing under our 2012 credit facility. Our 2012 credit facility in aggregate currently matures in March 2018, which includes two six-month extension options on the $1.2 billion revolving credit facility component of the facility. In December 2014, we received lender commitments sufficient to modify and extend the revolving credit facility from March 2018 to March 2020 and to reduce the margin by 25 basis points. This modification took effect in the first quarter of 2015.

If we are unable to make payments under our senior unsecured notes, the principal and unpaid interest will become immediately payable. If a property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments, the mortgagee could foreclose on the property, resulting in loss of income and asset value. Foreclosure on mortgaged properties or an inability to make payments under our 2012 credit facility or our senior unsecured notes could trigger defaults under the terms of our other financings, making such financings at risk of being declared immediately payable, and would have a negative impact on our financial condition and results of operations.

We may not be able to refinance existing indebtedness, which may require substantial principal payments at maturity. At the present time, we intend to exercise extension options, repay or refinance the debt associated with our properties on or prior to their respective maturity dates. At the time of refinancing, prevailing interest rates or other factors, such as the possible reluctance of lenders to make commercial real estate loans may result in higher interest rates. Increased interest expense on the extended or refinanced debt would adversely affect cash flow and our ability to service debt obligations and make distributions to SL Green. If any principal payments due at maturity cannot be repaid, refinanced or extended, our cash flow will not be sufficient to repay maturing or accelerated debt.

Financial covenants could adversely affect our ability to conduct our business.

The mortgages on our properties generally contain customary negative covenants that limit our ability to further mortgage the properties, to enter into material leases without lender consent or materially modify existing leases, among other things. In addition, our 2012 credit facility and senior unsecured notes contain restrictions and requirements on our method of operations. Our 2012 credit facility and our unsecured notes also require us to maintain designated ratios, including but not limited to, total debt-to-assets, debt service coverage and unencumbered assets-to-unsecured debt. These restrictions could adversely affect operations (including reducing our flexibility and our ability to incur additional debt), our ability to service debt obligations and our ability make to distributions to SL Green.

Rising interest rates could adversely affect our cash flow.

Advances under our 2012 credit facility of approximately $1.3 billion at December 31, 2014 bear interest at a variable rate. In addition, we could increase the amount of our outstanding variable rate debt in the future, in part by borrowing additional amounts under our 2012 credit facility, which consisted of a $1.2 billion revolving credit facility and $833.0 million term loan. Borrowings under our revolving credit facility and term loan bore interest at the 30-day LIBOR, plus spreads of 145 basis points and 140 basis points, respectively, at December 31, 2014. As of December 31, 2014, borrowings under our 2012 credit facility bore weighted average interest at 1.65%. We may incur indebtedness in the future that also bears interest at a variable rate or may

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be required to refinance our debt at higher rates. At December 31, 2014, a hypothetical 100 basis point increase in interest rates across each of our variable interest rate instruments would increase our annual interest costs by approximately $11.8 million. Accordingly, increases in interest rates could adversely affect our results of operations and financial conditions and our ability to continue to service debt and make distributions to SL Green.

Failure to hedge effectively against interest rate changes may adversely affect results of operations.

The interest rate hedge instruments we use to manage some of our exposure to interest rate volatility involve risk and counterparties may fail to honor their obligations under these arrangements. In addition, these arrangements may not be effective in reducing our exposure to interest rate changes and when existing interest rate hedges terminate, we may incur increased costs in putting in place further interest rate hedges. Failure to hedge effectively against interest rate changes may adversely affect our results of operations.

Increases in our level of indebtedness could adversely affect our cash flow.

SL Green considers its business as a whole in determining the amount of leverage of itself and its subsidiaries, including us. SL Green also considers other factors in making decisions regarding the incurrence of indebtedness, such as the purchase price of properties to be acquired with debt financing, the estimated market value of our properties upon refinancing and the ability of particular properties and our business as a whole to generate cash flow to cover expected debt service. Our organizational documents do not contain any limitation on the amount of indebtedness we may incur. As a result, if we become more highly leveraged, an increase in debt service could adversely affect cash available for distributions to SL Green and could increase the risk of default on our indebtedness.

A downgrade in our credit ratings could materially adversely affect our business and financial condition.

Our credit rating and the credit ratings assigned to our debt securities could change based upon, among other things, our results of operations and financial condition. These ratings are subject to ongoing evaluation by credit rating agencies, and any rating could be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant such action. Moreover, these credit ratings are not recommendations to buy, sell or hold our securities. If any of the credit rating agencies that have rated our securities downgrades or lowers its credit rating, or if any credit rating agency indicates that it has placed any such rating on a “watch list” for a possible downgrading or lowering, or otherwise indicates that its outlook for that rating is negative, such action could have a material adverse effect on our costs and availability of funding, which could in turn have a material adverse effect on our financial condition, results of operations, cash flows, the trading price of our securities and our ability to service debt obligations and make distributions to SL Green.

Debt and preferred equity investments could cause us to incur expenses, which could adversely affect our results of operations.

We owned or held interest in preferred equity investments with an aggregate net book value of approximately $173.2 million at December 31, 2014. Some of these investments may be recourse to their sponsors, while others are limited to the collateral securing the loan. In the event of a default under these obligations, we may have to take possession of the collateral securing these interests. Borrowers may contest enforcement of foreclosure or other remedies, seek bankruptcy protection against such enforcement and/or bring claims for lender liability in response to actions to enforce their obligations to us. Declines in the value of the property may prevent us from realizing an amount equal to our investment upon foreclosure or realization even if we make substantial improvements or repairs to the underlying real estate in order to maximize such property's investment potential. In addition, we may invest in mortgage-backed securities and other marketable securities.

We maintain and regularly evaluate the need for reserves to protect against potential future losses. Our reserves reflect management's judgment of the probability and severity of losses and the value of the underlying collateral. We cannot be certain that our judgment will prove to be correct and that our reserves will be adequate over time to protect against future losses because of unanticipated adverse changes in the economy or events adversely affecting specific properties, assets, tenants, borrowers, industries in which our tenants and borrowers operate or markets in which our tenants and borrowers or their properties are located. If our reserves for credit losses prove inadequate, we could suffer losses which would have a material adverse effect on our financial performance and our ability to service debt obligations and make distributions to SL Green.

We may incur costs to comply with environmental and health and safety laws.

We are subject to various federal, state and local environmental and health and safety laws which change from time to time. These laws regulate, among other things, air and water quality, our use, storage, disposal and management of hazardous substances and wastes and can impose liability on current and former property owners or operators for the clean-up of certain hazardous substances released on a property and any associated damage to natural resources without regard to whether the release was in compliance with law or whether it was caused by, or known to, the property owner or operator. The presence of hazardous substances on our properties may adversely affect occupancy and our ability to develop or sell or borrow against those properties. In addition to potential liability for clean-up costs, private plaintiffs may bring claims for personal injury, property damage or for similar

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reasons. Various laws also impose liability for the clean-up of contamination at any facility (e.g., a landfill) to which we have sent hazardous substances for treatment or disposal, without regard to whether the materials were transported, treated and disposed in accordance with law. Being held responsible for such a clean-up could result in significant cost to us and have a material adverse effect on our financial condition and results of operations.

We may incur significant costs complying with the Americans with Disabilities Act and other regulatory and legal requirements.

Our properties may be subject to risks relating to current or future laws including laws benefiting disabled persons, and other state or local zoning, construction or other regulations. These laws may require significant property modifications in the future which could result in fines being levied against us in the future. The occurrence of any of these events could have an adverse impact on our cash flows and ability to service debt and make distributions to SL Green.

Under the Americans with Disabilities Act, or ADA, all public accommodations must meet federal requirements related to access and use by disabled persons. Additional federal, state and local laws also may require modifications to our properties, or restrict our ability to renovate our properties. We have not conducted an audit or investigation of all of our properties to determine our compliance with laws and regulations to which we are subject. If one or more of our properties is not in compliance with the material provisions of the ADA or other legislation, then we may be required to incur additional costs to bring the property into compliance with the ADA or state or local laws. We cannot predict the ultimate amount of the cost of compliance with ADA or other legislation. If we incur substantial costs to comply with the ADA and any other legislation, our financial condition, results of operations and cash flow and/or ability to satisfy our debt service obligations and to make distributions to SL Green could be adversely affected.

We face potential conflicts of interest.

Members of management may have a conflict of interest over whether to enforce terms of agreements with entities which Mr. Green, directly or indirectly, has an affiliation.

Through Alliance Building Services, or Alliance, First Quality Maintenance, L.P., or First Quality, provides cleaning, extermination and related services, Classic Security LLC provides security services, Bright Star Couriers LLC provides messenger services, and Onyx Restoration Works provides restoration services with respect to certain properties owned by us. Alliance is partially owned by Gary Green, a son of Stephen L. Green, the chairman of SL Green's board of directors. In addition, First Quality has the non-exclusive opportunity to provide cleaning and related services to individual tenants at our properties on a basis separately negotiated with any tenant seeking such additional services. SL Green, including us, and our tenants accounted for 14.6% of Alliance's 2014 estimated total revenue. While we believe that the contracts pursuant to which these services are provided were the result of arm's length negotiations, there can be no assurance that the terms of such agreements, or dealings between the parties during the performance of such agreements, will be as favorable to us as those which could be obtained from unaffiliated third parties providing comparable services under similar circumstances. In addition, to the extent that we choose to enforce our rights under any of these agreements, we may determine to pursue available remedies, such as actions for damages or injunctive relief, less vigorously than we otherwise might because of our desire to maintain our ongoing relationship with Gary Green.

As of December 31, 2014, services were being provided by these entities to 17 of the properties owned by ROP.

Members of management may have a conflict of interest over whether to enforce terms of senior management's employment and noncompetition agreements.

Stephen L. Green, Marc Holliday, Andrew Mathias, Andrew Levine and Matthew J. DiLiberto entered into employment and noncompetition agreements with SL Green pursuant to which they have agreed not to actively engage in (i) the acquisition, development, management, leasing or financing of office real estate in the New York City Metropolitan area (in the case of Stephen L. Green) and (ii) the acquisition, development, management, leasing or financing of any office real estate throughout the United States and any multifamily residential or retail real estate located in Manhattan. For the most part, these restrictions apply to the executive both during his employment and for a period of time thereafter. Each executive is also prohibited from otherwise disrupting or interfering with our business through the solicitation of our employees or clients or otherwise. To the extent that SL Green chooses to enforce its rights under any of these agreements, SL Green may determine to pursue available remedies, such as actions for damages or injunctive relief, less vigorously than it otherwise might because of its desire to maintain an ongoing relationship with the individual involved. Additionally, the non-competition provisions of these agreements despite being limited in scope and duration, could be difficult to enforce, or may be subject to limited enforcement, should litigation arise over them in the future. Mr. Green also has interests in two properties in Manhattan, which are exempt from the non-competition provisions of his employment and non-competition agreement.

SL Green's failure to qualify as a REIT would be costly and would have a significant effect on the value of SL Green's securities.

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We believe that SL Green has operated in a manner to qualify as a REIT for federal income tax purposes and SL Green intends to continue to so operate. Many of the REIT compliance requirements, however, are highly technical and complex. The determination that SL Green is a REIT requires an analysis of factual matters and circumstances. These matters, some of which are not totally within our or SL Green's control, can affect its qualification as a REIT. For example, to qualify as a REIT, at least 95% of SL Green's gross income must come from designated sources that are listed in the REIT tax laws. SL Green is also required to distribute to stockholders at least 90% of its REIT taxable income excluding capital gains. The fact that SL Green holds its assets through the Operating Partnership and its subsidiaries further complicates the application of the REIT requirements. Even a technical or inadvertent mistake could jeopardize SL Green's REIT status. Furthermore, Congress and the Internal Revenue Service, or the IRS, might make changes to the tax laws and regulations, and the courts might issue new rulings that make it more difficult, or impossible, for SL Green to remain qualified as a REIT.

If SL Green fails to qualify as a REIT, it would be subject to federal income tax at regular corporate rates. Also, unless the IRS grants SL Green relief under specific statutory provisions, it would remain disqualified as a REIT for four years following the year it first failed to qualify. If SL Green failed to qualify as a REIT, it would have to pay significant income taxes and ROP would therefore have less money available for investments, to service debt obligations or make distributions to SL Green. As a result of all these factors, if SL Green fails to qualify as a REIT, this could impair our ability to expand our business and raise capital.

SL Green would incur adverse tax consequences if RARC failed to qualify as a REIT.

SL Green has assumed that RARC has historically qualified as a REIT for United States federal income tax purposes and that SL Green would continue to be able to qualify as a REIT following the Merger. However, if RARC failed to qualify as a REIT, SL Green generally would have succeeded to significant tax liabilities including the significant tax liability that would result from a deemed sale of assets by RARC pursuant to the Merger.

Loss of our key personnel could harm our operations.

We are dependent on the efforts of Marc Holliday, the chief executive officer of SL Green and president of Wyoming Acquisition GP LLC, or WAGP, the sole general partner of ROP, and Andrew Mathias, the president of SL Green. These officers have employment agreements which expire in January 2016 and December 2016, respectively. A loss of the services of either of these individuals could adversely affect our operations.

Our business and operations would suffer in the event of system failures or cyber security attacks.

Despite system redundancy, the implementation of security measures and the existence of a disaster recovery plan for our internal information technology systems, our systems are vulnerable to a number of risks including energy blackouts, natural disasters, terrorism, war, telecommunication failures and cyber attacks and intrusions, such as computer viruses, malware, attachments to e-mails, intrusion and unauthorized access, including from persons inside our organization or from persons outside our organization with access to our systems. The risk of a security breach or disruption, particularly through cyber attacks and intrusions, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and instructions from around the world have increased. Our systems are critical to the operation of our business and any system failure, accident or security breach that causes interruptions in our operations could result in a material disruption to our business. We may also incur additional costs to remedy damages caused by such disruptions. Although we make efforts to maintain the security and integrity of our systems and have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Any compromise of our security could also result in a violation of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, loss or misuse of the information (which may be confidential, proprietary and/or commercially sensitive in nature) and a loss of confidence in our security measures, which could harm our business.

Our property taxes could increase due to reassessment or property tax rate changes.

We are required to pay real property taxes in respect of our properties and such taxes may increase as our properties are reassessed by taxing authorities or as property tax rates change. An increase in the assessed value of our properties or our property tax rates could adversely impact our financial condition, results of operations and our ability to service debt obligations and make distributions to SL Green.

Compliance with changing or new regulations applicable to corporate governance and public disclosure may result in additional expenses, affect our operations and affect our reputation.

Changing or new laws, regulations and standards relating to corporate governance and public disclosure, including SEC regulations and the New York Stock Exchange rules, can create uncertainty for public companies. These changed or new laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity. As a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result

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in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining high standards of corporate governance and public disclosure. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, our reputation may be harmed.

Our efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. In particular, our continued efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding our required assessment of our internal controls over financial reporting have required the commitment of significant financial and managerial resources. We expect these efforts to require the continued commitment of significant resources. Further, our directors, president and treasurer could face an increased risk of personal liability in connection with the performance of their duties. As a result, we may have difficulty attracting and retaining qualified directors and executive officers, which could harm our business.

Forward-looking statements may prove inaccurate

See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—Forward-looking Information," for additional disclosure regarding forward-looking statements.

ITEM 1B. UNRESOLVED STAFF COMMENTS

As of December 31, 2014, we did not have any unresolved comments with the staff of the SEC.

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ITEM 2. PROPERTIES

Our Portfolio

General

As of December 31, 2014, we owned or held interests in 13 commercial office buildings encompassing approximately 7.6 million rentable square feet, located primarily in midtown Manhattan. Certain of these properties include at least a small amount of retail space on the lower floors, as well as basement/storage space. As of December 31, 2014, our portfolio also included ownership interests in 20 commercial office buildings encompassing approximately 3.4 million rentable square feet located in Brooklyn, Westchester County, Connecticut and New Jersey, which we refer to as our Suburban properties.

At December 31, 2014, we also owned a mixed-use residential and prime retail property encompassing approximately 492,987 square feet, a redevelopment property encompassing approximately 104,000 square feet and a land interest encompassing approximately 176,530 square feet. As of December 31, 2014, we also held preferred equity and other investments with a book value of $173.2 million.

The following tables set forth certain information with respect to each of the Manhattan and Suburban office, prime retail, residential, redevelopment properties and land interest in the portfolio as of December 31, 2014:



	Year Built/ Renovated	SubMarket	Approximate Rentable Square Feet	Percentage of Portfolio Rentable Square Feet	Percent Occupied⁽¹⁾		Annualized Cash Rent ⁽²⁾		Percentage of Portfolio Annualized Cash Rent	Number of Tenants	Annualized Cash Rent Per Leased Square Foot ⁽³⁾
MANHATTAN OFFICE PROPERTIES
110 East 42nd Street	1921	Grand Central	215,400	2%	98.8	%	$	10,364,856	2%	22	$	51.15
1185 Avenue of the Americas(4)	1969	Rockefeller Center	1,062,000	10	99.9	%	87,476,904		17	19	$	81.13
125 Park Avenue(5)	1923/2006	Grand Central	604,245	6	80.4	%	29,298,864		6	22	$	58.83
1350 Avenue of the Americas	1966	Rockefeller Center	562,000	5	96.9	%	39,094,293		8	36	$	69.07
304 Park Avenue South	1930	Midtown South	215,000	2	91.9	%	11,976,660		2	13	$	62.03
461 Fifth Avenue(4)	1988	Midtown	200,000	2	96.5	%	16,606,080		3	12	$	82.60
555 West 57th Street	1971	Midtown West	941,000	9	99.9	%	37,381,476		8	10	$	36.82
609 Fifth Avenue	1925/1990	Rockefeller Center	160,000	1	81.3	%	14,085,768		3	13	$	114.46
625 Madison Avenue(4)(5)	1956/2002	Plaza District	563,000	5	92.1	%	47,157,372		9	21	$	88.43
641 Sixth Avenue	1902	Midtown South	163,000	1	92.1	%	8,521,524		2	7	$	56.20
750 Third Avenue	1958/2006	Grand Central North	780,000	7	96.7	%	43,606,644		9	30	$	56.21
810 Seventh Avenue	1970	Times Square	692,000	6	81.0	%	36,652,068		7	41	$	62.07
919 Third Avenue(6)	1970	Grand Central North	1,454,000	13	90.3	%	84,800,004		9	11	$	64.24
Total / Weighted Average Manhattan Office Properties			7,611,645	69%	92.8	%	$	467,022,513	85%	257
SUBURBAN OFFICE PROPERTIES
100 Summit Lake Drive	1988	Valhalla, Westchester	250,000	2%	72.9	%	$	4,372,248	1%	10	$	24.53
1100 King Street - 1-6 International Drive	1983-1986	Rye Brook, Westchester	540,000	5	60.2	%	8,694,168		2	27	$	26.15
115-117 Stevens Avenue	1984	Valhalla, Westchester	178,000	2	75.1	%	2,753,964		0	10	$	23.09
140 Grand Street	1991	White Plains, Westchester	130,100	1	100.0	%	4,123,920		1	15	$	34.81
200 Summit Lake Drive	1990	Valhalla, Westchester	245,000	2	80.2	%	4,645,920		1	8	$	24.51
360 Hamilton Avenue	2000	White Plains, Westchester	384,000	4	92.3	%	12,840,336		3	19	$	36.02
500 Summit Lake Drive	1986	Valhalla, Westchester	228,000	2	97.8	%	4,987,236		1	7	$	25.29
520 White Plains Road	1979	Tarrytown, Westchester	180,000	2	76.2	%	3,550,248		0	11	$	27.38
Westchester, NY Subtotal/Weighted Average			2,135,100	20%	78.8	%	$	45,968,040	9%	107
1010 Washington Boulevard	1988	Stamford, Connecticut	143,400	2%	77.1	%	$	3,601,092	1%	23	$	34.54

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1055 Washington Boulevard(4)	1987	Stamford, Connecticut	182,000	2	89.2	%	6,279,972		1	23	$	37.01
680 Washington(6)	1989	Stamford, Connecticut	133,000	1	80.9	%	4,646,412		0	9	$	43.71
7 Landmark Square	1973-1984	Stamford, Connecticut	36,800	0	76.9	%	313,536		0	1	$	78.78
750 Washington Boulevard(6)	1989	Stamford, Connecticut	192,000	2	97.8	%	7,721,700		1	11	$	41.09
Connecticut Subtotal/Weighted Average			687,200	7%	86.8	%	$	22,562,712	3%	67
125 Chubb Way(5)	2008	Lyndhurst, New Jersey	278,000	3%	62.4	%	$	3,851,880	1%	5	$	23.37
New Jersey Subtotal/Weighted Average			278,000	3%	62.4	%	$	3,851,880	1%	5
16 Court Street(5)	1927-1928	Brooklyn, New York	317,600	1%	94.7	%	$	11,572,848	2%	67	$	39.98
Brooklyn Subtotal/Weighted Average			317,600	1%	94.7	%	$	11,572,848	2%	67
Total / Weighted Average Suburban Office Properties			3,417,900	31%	80.5	%	$	83,955,480	15%	246
Portfolio Grand Total / Weighted Average			11,029,545	100%	89.0	%	$	550,977,993	100%	503
Portfolio Grand Total—ROP share of Annualized Cash Rent							$	503,365,616
PRIME RETAIL
102 Greene Street	1910	SoHo	9,200	3%	100.0	%	$	633,132	3%	3	$	68.82
115 Spring Street	1900	SoHo	5,218	1	100.0	%	935,748		5	1	$	179.33
131-137 Spring Street(5)	1891	SoHo	68,342	19	92.0	%	4,548,411		21	11	$	72.37
315 West 33rd Street - The Olivia	2000	Penn Station	270,132	77	100.0	%	15,199,764		71	10	$	56.27
Total/Weighted Average Retail Properties			352,892	100%	98.4	%	$	21,317,055	100%	25
LAND
635 Madison Avenue			176,530	100%	100.0	%	3,677,574		100%		$	20.83
Total/Weighted Average Land Properties			176,530	100%	100.0	%	$	3,677,574	100%
REDEVELOPMENT
635 Sixth Avenue	1902	Midtown South	104,000	100%	72.5	%	5,441,412		100%	1	$	72.12
Total/Weighted Average Redevelopment Properties			104,000	100%	72.5	%	$	5,441,412	100%	1



RESIDENTIAL PROPERTY	SubMarket	Usable Sq. Feet	Total Units	Percent Leased		Annualized Cash Rent(1)		Average Monthly Rent Per Unit
315 West 33rd Street - The Olivia	Penn Station	222,855	333	95.8	%	$	14,324,721	$	3,754

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(1)	Excludes leases signed but not yet commenced as of December 31, 2014.

(2)

Annualized Cash Rent represents the monthly contractual rent under existing leases as of December 31, 2014 multiplied by 12. This amount reflects total rent before any rent abatements and includes expense reimbursements, which may be estimated as of such date. Total rent abatements for leases in effect as of December 31, 2014 for the 12 months ending December 31, 2015 will reduce cash rent by $11.2 million for our properties.


(3)	Annualized Cash Rent Per Leased Square Foot represents Annualized Cash Rent, as described in footnote (1) above, presented on a per leased square foot basis.


(4)	We hold a leasehold interest in this property.


(5)	Properties that were transferred in 2014.


(6)	ROP own a 51% interest in this joint venture asset.

Historical Occupancy

SL Green has historically achieved consistently higher occupancy rates in our Manhattan portfolio in comparison to the overall midtown markets, as shown over the last five years in the following table:



	Percent of Manhattan Portfolio Occupied⁽¹⁾		Occupancy Rate of Class A Office Properties in the midtown Markets⁽²⁾⁽³⁾		Occupancy Rate of Class B Office Properties in the midtown Markets⁽²⁾⁽³⁾
December 31, 2014	95.3	%	89.4	%	91.6	%
December 31, 2013	94.3	%	88.3	%	89.1	%
December 31, 2012	94.3	%	89.1	%	90.0	%
December 31, 2011	92.5	%	89.7	%	91.3	%
December 31, 2010	92.9	%	88.6	%	90.9	%

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(1)	Includes space for leases that were executed as of the relevant date in the wholly-owned and joint venture properties in Manhattan owned by SL Green as of that date.

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(2)	Includes vacant space available for direct lease and sublease. Source: Cushman & Wakefield.

(3)

The term "Class B" is generally used in the Manhattan office market to describe office properties that are more than 25 years old but that are in good physical condition, enjoy widespread acceptance by high-quality tenants and are situated in desirable locations in Manhattan. Class B office properties can be distinguished from Class A properties in that Class A properties are generally newer properties with higher finishes and frequently obtain the highest rental rates within their markets.

SL Green has generally historically achieved consistently higher occupancy rates in our Westchester County and Connecticut portfolios in comparison to the overall Westchester County and Stamford, Connecticut, CBD markets, as shown over the last five years in the following table:



	Percent of Westchester Portfolio Occupied⁽¹⁾		Occupancy Rate of Class A Office Properties in the Westchester Market⁽²⁾		Percent of Connecticut Portfolio Occupied⁽¹⁾		Occupancy Rate of Class A Office Properties in the Stamford CBD Market⁽²⁾
December 31, 2014	78.8	%	76.6	%	83.6	%	75.7	%
December 31, 2013	78.1	%	79.4	%	80.5	%	74.7	%
December 31, 2012	79.2	%	78.5	%	80.7	%	73.7	%
December 31, 2011	80.6	%	80.1	%	80.3	%	73.8	%
December 31, 2010	80.0	%	80.3	%	84.3	%	77.6	%

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(1)	Includes space for leases that were executed as of the relevant date in the wholly-owned and joint venture properties owned by SL Green as of that date.


(2)	Includes vacant space available for direct lease and sublease. Source: Cushman & Wakefield.

Lease Expirations

Leases in our Manhattan portfolio, as at many other Manhattan office properties, typically have an initial term of seven to fifteen years, compared to typical lease terms of five to ten years in other large U.S. office markets. For the five years ending December 31, 2019, the average annual rollover at our Manhattan operating properties is expected to be approximately 0.4 million square feet representing an average annual expiration rate of approximately 5.9% per year (assuming no tenants exercise renewal or cancellation options and there are no tenant bankruptcies or other tenant defaults).

The following table sets forth a schedule of the annual lease expirations at our Manhattan operating properties, with respect to leases in place as of December 31, 2014 for each of the next ten years and thereafter (assuming that no tenants exercise renewal or cancellation options and that there no tenant bankruptcies or other tenant defaults):



Manhattan Operating Properties Year of Lease Expiration	Number of Expiring Leases⁽¹⁾	Square Footage of Expiring Leases	Percentage of Total Leased Square Feet		Annualized Cash Rent of Expiring Leases⁽²⁾		Annualized Cash Rent Per Leased Square Foot of Expiring Leases⁽³⁾
2015⁽⁴⁾	29	153,208	2.1	%	$	10,897,536	$	71.13
2016	34	630,424	8.7		42,337,154		$	67.16
2017	27	349,969	4.8		24,328,370		$	69.52
2018	23	363,123	5.0		34,251,672		$	94.33
2019	23	665,381	9.2		44,145,262		$	66.35
2020	23	703,507	9.7		47,381,976		$	67.35
2021	22	1,151,234	15.9		70,699,647		$	61.41
2022	20	622,324	8.6		37,103,436		$	59.62
2023	16	486,429	6.7		26,490,764		$	54.46
2024 & thereafter	47	2,123,207	29.3		129,386,696		$	60.94
Total/weighted average	264	7,248,806	100.0	%	$	467,022,513	$	64.43

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(1)	Tenants may have multiple leases.

(2)

Annualized Cash Rent of Expiring Leases represents the monthly contractual rent under existing leases as of December 31, 2014 multiplied by 12. This amount reflects total rent before any rent abatements and includes expense reimbursements, which may be estimated as of such date. Total rent abatements for leases in effect as of December 31, 2014 for the 12 months ending December 31, 2015 will reduce cash rent by $8.8 million for the properties.


(3)	Annualized Cash Rent Per Leased Square Foot of Expiring Leases represents Annualized Cash Rent of Expiring Leases, as described in footnote (2) above, presented on a per leased square foot basis.


(4)	Includes approximately 13,456 square feet and annualized cash rent of $810,960 occupied by month-to-month holdover tenants whose leases expired prior to December 31, 2014.

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Leases in our Suburban portfolio, as at many other suburban operating properties, typically have an initial term of five to ten years. For the five years ending December 31, 2019, the average annual rollover at our Suburban operating properties is expected to be approximately 0.3 million square feet, representing an average annual expiration rate of approximately 10.5% per year (assuming no tenants exercise renewal or cancellation options and there are no tenant bankruptcies or other tenant defaults).

The following tables set forth a schedule of the annual lease expirations at our Suburban operating properties with respect to leases in place as of December 31, 2014 for each of the next ten years and thereafter (assuming that no tenants exercise renewal or cancellation options and that there are no tenant bankruptcies or other tenant defaults):



Suburban Operating Properties Year of Lease Expiration	Number of Expiring Leases⁽¹⁾	Square Footage of Expiring Leases	Percentage of Total Leased Square Feet		Annualized Cash Rent of Expiring Leases⁽²⁾		Annualized Cash Rent Per Leased Square Foot of Expiring Leases⁽³⁾
2015⁽⁴⁾	38	213,874	8.1	%	$	7,428,744	$	34.73
2016	40	369,632	14.0		13,308,924		$	36.01
2017	25	122,149	4.6		5,052,900		$	41.37
2018	28	195,855	7.4		6,461,676		$	32.99
2019	35	525,025	19.8		14,678,256		$	27.96
2020	18	286,776	10.8		9,105,748		$	31.75
2021	15	233,266	8.8		6,123,660		$	26.25
2022	10	51,813	2.0		1,683,384		$	32.49
2023	9	155,316	5.9		4,928,508		$	31.73
2024 & thereafter	29	494,186	18.6		15,183,680		$	30.72
Total/weighted average	247	2,647,892	100.0	%	$	83,955,480	$	31.71

____________________________________________________________________


(1)	Tenants may have multiple leases.

(2)


(3)	Annualized Cash Rent Per Leased Square Foot of Expiring Leases represents Annualized Cash Rent of Expiring Leases, as described in footnote (2) above, presented on a per leased square foot basis.


(4)	Includes approximately 33,174 square feet and annualized cash rent of $1.3 million occupied by month-to-month holdover tenants whose leases expired prior to December 31, 2014.

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Tenant Diversification

At December 31, 2014, our Manhattan and Suburban office properties were leased to 503 tenants, which are engaged in a variety of businesses, including professional services, financial services, media, apparel, business services and government/non-profit. The following table sets forth information regarding the leases with respect to the ten largest tenants in our Manhattan and Suburban office properties, which are not intended to be representative of our tenants as a whole, based on the amount of square footage leased by our tenants as of December 31, 2014:



Tenant	Properties	Lease Expiration	Total Leased Square Feet	Percentage of Aggregate Portfolio Leased Square Feet		Percentage of Aggregate Portfolio Annualized Cash Rent
Debevoise & Plimpton, LLP	919 Third Avenue	2021	619,353	5.6	%	4.4	%
Ralph Lauren Corporation	625 Madison Avenue	2019	339,381	3.1		4.7
C.B.S. Broadcasting, Inc.	555 West 57th Street	2023	295,226	2.7		2.4
Advance Magazine Group, Fairchild Publications	750 Third Avenue	2021	286,622	2.6		2.5
Schulte, Roth & Zabel LLP	919 Third Avenue	2036	263,186	2.4		1.7
BMW of Manhattan	555 West 57th Street	2022	227,782	2.1		1.2
The City University of New York - CUNY	555 West 57th Street & 16 Court Street	2020, 2023 & 2030	227,622	2.1		1.7
Amerada Hess Corp.	1185 Avenue of the Americas	2027	181,569	1.6		2.6
News America Incorporated	1185 Avenue of the Americas	2020	161,722	1.5		3.0
King & Spalding	1185 Avenue of the Americas	2025	159,943	1.5		2.8
Total			2,762,406	25.2	%	27.0	%

Environmental Matters

We engaged independent environmental consulting firms to perform Phase I environmental site assessments on our portfolio, in order to assess existing environmental conditions. All of the Phase I assessments met the American Society for Testing and Materials (ASTM) Standard. Under the ASTM Standard, a Phase I environmental site assessment consists of a site visit, a historical record review, a review of regulatory agency data bases and records, and interviews with on-site personnel, with the purpose of identifying potential environmental concerns associated with real estate. These environmental site assessments did not reveal any known environmental liability that we believe will have a material adverse effect on our results of operations or financial condition.

ITEM 3. LEGAL PROCEEDINGS

As of December 31, 2014, we were not involved in any material litigation nor, to management's knowledge, was any material litigation threatened against us or our portfolio other than routine litigation arising in the ordinary course of business or litigation that is adequately covered by insurance.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

There is no established trading market for our common equity. As of March 13, 2015, there were two holders of our Class A common units, both of which are subsidiaries of SL Green.

COMMON UNITS

No distributions have been declared by ROP in respect of its Class A common units subsequent to the Merger on January 25, 2007.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We did not sell any Class A common units during the years ended December 31, 2014, 2013 and 2012 that were not registered under the Securities Act of 1933, as amended.

None of the Class A common units were exchanged into shares of SL Green's common stock and cash in accordance with the Merger Agreement.

PURCHASES OF EQUITY SECURITIES BY ISSUER AND AFFILIATE PURCHASERS

None.

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ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth our selected financial data and should be read in conjunction with our Financial Statements and notes thereto included in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Item 8, "Financial Statements and Supplementary Data" in this Annual Report on Form 10-K.

In connection with this Annual Report on Form 10-K, we are restating our historical audited consolidated financial statements as a result of the sale of a property located at 673 First Avenue, New York, New York. As a result, we have reported revenue and expenses from this property as discontinued operations for each period presented in our Annual Report on Form 10-K. This reclassification had no effect on our reported net income.

In addition to the reclassification of discontinued operations, SL Green transferred five properties in 2014 with total assets of $884.3 million to ROP. Under the Business Combinations guidance, these transfers were determined to be transfers of businesses between the indirect parent company and its wholly-owned subsidiary. As such, the assets and liabilities of the properties were transferred at their carrying value and were recorded as of the beginning of the current reporting period as though the assets and liabilities had been transferred at that date. The consolidated financial statements and financial information presented for all prior periods have been retrospectively adjusted to furnish comparative information.

We are also providing updated summary selected financial information, which is included below, reflecting the prior period reclassification as discontinued operations of the property sold during 2014 and as of December 31, 2014.



	Year Ended December 31,
Operating Data (in thousands)	2014			2013			2012			2011			2010
Total revenues	$	678,237		$	640,907		$	570,851		$	548,741		$	518,370
Operating expenses	147,211			139,317			128,900			128,100			117,221
Real estate taxes	127,333			112,813			103,280			94,923			87,344
Ground rent	15,458			15,656			15,348			15,316			15,355
Interest expense, net of interest income	120,006			123,458			120,336			94,271			79,080
Amortization of deferred finance costs	6,023			5,964			6,152			2,322			947
Depreciation and amortization	192,114			177,127			154,753			144,182			129,283
Loan loss reserves, net of recoveries	—			—			(472		)	(2,425		)	—
Transaction related costs, net of recoveries	2,594			2,032			2,530			207			1,091
Marketing, general and administrative	345			354			339			346			493
Total expenses	611,084			576,721			531,166			477,242			430,814
Equity in net income from unconsolidated joint venture	2,810			3,942			966			497			711
Equity in net gain on sale of interest in unconsolidated joint venture	—			—			1,001			—			—
Depreciable real estate reserves	—			—			—			(5,789		)	—
Loss on early extinguishment of debt	(7,385		)	(76		)	(6,904		)	—			(1,202		)
Income from continuing operations	62,578			68,052			34,748			66,207			87,065
Discontinued operations	119,575			19,663			5,703			7,276			3,488
Net income	182,153			87,715			40,451			73,483			90,553
Net income attributable to noncontrolling interests	(2,641		)	(5,200		)	(6,013		)	(9,886		)	(13,682		)
Net income attributable to ROP common unitholder	$	179,512		$	82,515		$	34,438		$	63,597		$	76,871



	As of December 31,
Balance Sheet Data (in thousands)	2014		2013		2012		2011		2010
Commercial real estate, before accumulated depreciation	$	6,801,195	$	6,556,482	$	6,178,574	$	5,691,459	$	5,553,295
Total assets	6,384,874		6,472,016		6,172,968		5,508,678		5,490,512
Mortgage note and other loan payable, revolving credit facility and term loan and senior unsecured notes	2,673,001		2,547,138		2,322,566		2,220,542		1,366,164
Total capital	3,454,707		3,595,918		3,508,755		2,938,946		3,738,427

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

Overview

Reckson Operating Partnership, L.P., or ROP, commenced operations on June 2, 1995. The sole general partner of ROP is a wholly-owned subsidiary of SL Green Operating Partnership, L.P., or the Operating Partnership. The sole limited partner of ROP is the Operating Partnership. SL Green Realty Corp., or SL Green, is the general partner of the Operating Partnership. Unless the context requires otherwise, all references to "we," "our," "us" and the "Company" means ROP and all entities owned or controlled by ROP.

The following discussion related to our consolidated financial statements should be read in conjunction with the financial statements appearing in Item 8 of this Annual Report on Form 10-K.

The New York City commercial real estate market continued to strengthen in 2014, and we took advantage of this strengthening market in improving occupancies and deploying capital in the borough of Manhattan to strategically position the Company for future growth.

Leasing and Operating

In 2014, SL Green's Manhattan office property occupancy on same-store properties based on leases signed increased to 95.7% from 95.3% in the prior year, SL Green signed office leases in Manhattan encompassing 2.1 million square feet, of which 1.3 million square feet represented office leases that replaced previously occupied space. SL Green's mark-to-market on these 1.3 million square feet of signed Manhattan office leases that replaced previously occupied space was 14.9% for 2014.

New leasing activity in Manhattan in 2014 totaled 32.8 million square feet, the highest level of activity since 1998. Of the total 2014 leasing activity in Manhattan, the Midtown submarket accounted for 19.5 million square feet, or 59.5%. Midtown's overall office vacancy decreased from 11.2% at December 31, 2013 to 9.3% at December 31, 2014.

Manhattan overall asking rents increased 6.8% year-over-year to $67.70 per square foot. Midtown asking rents at $75.14 per square foot, exceeded $75.00 per square foot for the first time since January 2009. The Midtown South average asking rent fell 3.0% year-over-year to $60.72 per square foot as higher priced space was absorbed. Downtown overall asking rents reached a record $51.04 per square foot as the completion of One World Trade Center drove asking rents in the World Trade submarket to the highest rent ever recorded in any Downtown submarket.

Assets Transfer

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Location	Type	Number of Buildings	Approximate Square Feet	Weighted Average Occupancy⁽¹⁾
Commercial:
Manhattan	Office	13	7,611,645	92.8	%
	Retail⁽²⁾	5	352,892	98.4	%
	Development/Redevelopment	1	104,000	72.5	%
	Fee Interest	1	176,530	100.0	%
		20	8,245,067	92.9	%
Suburban	Office	20	3,417,900	80.5	%
Total commercial properties		40	11,662,967	89.3	%
Residential:
Manhattan	Residential⁽²⁾	—	222,855	95.8	%
Total Portfolio		40	11,885,822	89.4	%

____________________________________________________________________


(1)	The weighted average occupancy represents the total leased square feet divided by total available rentable square feet.


(2)	As of December 31, 2014, we owned a building that was comprised of approximately 270,132 square feet of retail space and approximately 222,855 square feet of residential space. For the purpose of this report, we have included the building as part of retail properties and have shown the square footage under its respective classifications.

As of December 31, 2014, we also held preferred equity and other investments with a book value of $173.2 million.

Critical Accounting Policies

Our discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and contingencies as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We evaluate our assumptions and estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Investment in Commercial Real Estate Properties

On a periodic basis, we assess whether there are any indications that the value of our real estate properties may be impaired or that their carrying value may not be recoverable. A property's value is considered impaired if management's estimate of the aggregate future cash flows (undiscounted and without interest charges for properties) to be generated by the property is less than the carrying value of the property. To the extent impairment has occurred, the loss will be measured as the excess of the carrying amount of the property over the calculated fair value of the property. We do not believe that the values of any of our properties were impaired at December 31, 2014.

We incur a variety of costs in the development and leasing of our properties. After determination is made to capitalize a cost, it is allocated to the specific component of a project that is benefited. Determination of when a development project is substantially complete and capitalization must cease involves a degree of judgment. The costs of land and building under development include specifically identifiable costs. The capitalized costs include, but are not limited to, pre-construction costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes, salaries and related costs and other costs incurred during the period of development. We consider a construction project as substantially completed and held available for occupancy upon the completion of tenant improvements, but no later than one year from cessation of major construction activity. We cease capitalization on the portions substantially completed and occupied or held available for occupancy, and capitalize only those costs associated with the portions under construction.

We recognize the assets acquired, liabilities assumed (including contingencies) and any noncontrolling interests in an acquired entity at their fair values on the acquisition date. We expense acquisition-related transaction costs as incurred, which are included in transaction related costs on our consolidated statements of income.

We allocate the purchase price of real estate to land and building (inclusive of tenant improvements) and, if determined to be material, intangibles, such as the value of the above- and below-market leases and origination costs associated with the in-place

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leases. We depreciate the amount allocated to building (inclusive of tenant improvements) over their estimated useful lives, which generally range from three to 40 years. We amortize the amount allocated to the above- and below-market leases over the remaining term of the associated lease, which generally range from one to 14 years, and record it as either an increase (in the case of below-market leases) or a decrease (in the case of above-market leases) to rental income. We amortize the amount allocated to the values associated with in-place leases over the expected term of the associated lease, which generally ranges from one to 14 years. If a tenant vacates its space prior to the contractual termination of the lease and no rental payments are being made on the lease, any unamortized balance of the related intangible will be written off. The tenant improvements and origination costs are amortized as an expense over the remaining life of the lease (or charged against earnings if the lease is terminated prior to its contractual expiration date). We assess fair value of the leases based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends, and market/economic conditions that may affect the property. To the extent acquired leases contain fixed rate renewal options that are below-market and determined to be material, we amortize such below-market lease value into rental income over the renewal period.

Revenue Recognition

Rental revenue is recognized on a straight-line basis over the term of the lease. The excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in deferred rents receivable on the consolidated balance sheets. We establish, on a current basis, an allowance for future potential tenant credit losses, which may occur against this account. The balance reflected on the consolidated balance sheets is net of such allowance.

We record a gain on sale of real estate when title is conveyed to the buyer, subject to the buyer's financial commitment being sufficient to provide economic substance to the sale and we have no substantial economic involvement with the buyer.

Interest income on debt and preferred equity investments is accrued based on the outstanding principal amount and contractual terms of the instruments and when, in the opinion of management, it is deemed collectible. Interest is recognized on such loans at the accrual rate subject to management's determination that accrued interest is ultimately collectible, based on the underlying collateral and operations of the borrower. If management cannot make this determination, interest income above the current pay rate is recognized only upon actual receipt.

Deferred origination fees, original issue discounts and loan origination costs, if any, are recognized as a reduction to the interest income over the terms of the related investments using the effective interest method. Fees received in connection with loan commitments are also deferred until the loan is funded and are then recognized over the term of the loan as an adjustment to yield.

Debt and preferred equity investments are placed on a non-accrual status at the earlier of the date at which payments become 90 days past due or when, in the opinion of management, a full recovery of interest income becomes doubtful. Interest income recognition on any non-accrual debt or preferred equity investment is resumed when such non-accrual debt or preferred equity investment becomes contractually current and performance is demonstrated to be resumed. Interest is recorded as income on impaired loans only to the extent cash is received.

We may syndicate a portion of the loans that we originate or sell these loans individually. When a transaction meets the criteria of sale accounting, we derecognize the loan sold and recognize gain or loss based on the difference between the sales price and the carrying value of the loan sold. Any related unamortized deferred origination fees, loan origination costs, discounts or premiums at the time of sale are recognized as an adjustment to the gain or loss on sale, which is included in investment income on the consolidated statement of income. Any fees received at the time of sale or syndication are recognized as part of investment income.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our tenants to make required payments. If the financial condition of a specific tenant were to deteriorate, resulting in an impairment of its ability to make payments, additional allowances may be required.

Reserve for Possible Credit Losses

The expense for possible credit losses in connection with preferred equity investments is the charge to earnings to increase the allowance for possible credit losses to the level that we estimate to be adequate, based on Level 3 data, considering delinquencies, loss experience and collateral quality. Other factors considered relate to geographic trends and product diversification, the size of the portfolio and current economic conditions. Based upon these factors, we establish the provision for possible credit loss on each individual investment. When it is probable that we will be unable to collect all amounts contractually due, the investment is considered impaired.

Where impairment is indicated on an investment that is held to maturity, a valuation allowance is measured based upon the excess of the recorded investment amount over the net fair value of the collateral. Any deficiency between the carrying amount

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of an asset and the calculated value of the collateral is charged to expense. We continue to assess or adjust our estimates based on circumstances of a loan and the underlying collateral. If the additional information obtained reflects increased recovery of our investment, we will adjust our reserves accordingly. There were no additional loan reserves recorded during the years ended December 31, 2014, 2013 and 2012. We recorded recoveries of $0.5 million during the year ended December 31, 2012 in connection with the sale of our investments. This is included in loan loss reserves, net of recoveries on the accompanying consolidated statements of income.

Derivative Instruments

In the normal course of business, we use a variety of commonly used derivative instruments, such as interest rate swaps, caps, collar and floors, to manage, or hedge, interest rate risk. Effectiveness is essential for those derivatives that we intend to qualify for hedge accounting. Some derivative instruments are associated with an anticipated transaction. In those cases, hedge effectiveness criteria also require that it be probable that the underlying transaction occurs. Instruments that meet these hedging criteria are formally designated as hedges at the inception of the derivative contract.

To determine the fair values of derivative instruments, we use a variety of methods and assumptions that are based on market conditions and risks existing at each balance sheet date. For the majority of financial instruments including most derivatives, long-term investments and long-term debt, standard market conventions and techniques such as discounted cash flow analysis, option-pricing models, replacement cost, and termination cost are used to determine fair value. All methods of assessing fair value result in a general approximation of value, and such value may never actually be realized.

Results of Operations

Comparison of the year ended December 31, 2014 to the year ended December 31, 2013

The following section compares the results of operations for the year ended December 31, 2014 to the year ended December 31, 2013 for the 39 properties owned by ROP. Acquisition properties represent properties acquired in 2014 or 2013 and properties transferred to us by SL Green following its acquisition. Any assets sold or held for sale are excluded from income from continuing operations.



(in thousands)	2014			2013			$ Change			% Change
Rental revenue, net	$	549,531		$	508,708		$	40,823		8.0	%
Escalation and reimbursement	90,712			84,235			6,477			7.7	%
Investment income	35,141			43,226			(8,085		)	(18.7	)%
Other income	2,853			4,738			(1,885		)	(39.8	)%
Total revenues	$	678,237		$	640,907		$	37,330		5.8	%

Property operating expenses	290,002			267,786			22,216			8.3	%
Transaction related costs	2,594			2,032			562			27.7	%
Marketing, general and administrative	345			354			(9		)	(2.5	)%
	292,941			270,172			22,769			8.4	%

Net operating income	385,296			370,735			14,561			3.9	%

Interest expense and amortization of financing costs, net of interest income	(126,029		)	(129,422		)	3,393			(2.6	)%
Depreciation and amortization	(192,114		)	(177,127		)	(14,987		)	8.5	%
Equity in net income from unconsolidated joint venture	2,810			3,942			(1,132		)	(28.7	)%
Loss on early extinguishment of debt	(7,385		)	(76		)	(7,309		)	9,617.1	%
Income from continuing operations	62,578			68,052			(5,474		)	(8.0	)%
Net income from discontinued operations	1,996			5,907			(3,911		)	(66.2	)%
Gain on sale of discontinued operations	117,579			13,756			103,823			754.7	%
Net income	$	182,153		$	87,715		$	94,438		107.7	%

Rental, Escalation and Reimbursement Revenues

Rental revenue increased primarily as a result of the acquisitions of 315 West 33rd Street in November 2013 ($22.9 million) and 16 Court Street, Brooklyn ($3.7 million), increase in occupancy at 1185 Avenue of the Americas ($7.8 million), and a one-time write-off of value for above-market leases associated with a former tenant ($6.8 million) in 2013.

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Escalation and reimbursement revenue increased primarily as a result of the acquisition of 315 West 33rd Street in November 2013 ($4.0 million) and higher real estate tax recoveries from non-acquisition properties ($2.6 million).

Occupancy in our Manhattan office properties was 92.8% at December 31, 2014 compared to 93.2% at December 31, 2013. Occupancy in our Suburban office properties was 80.5% at December 31, 2014 compared to 78.3% at December 31, 2013. At December 31, 2014, approximately 1.9% and 6.8% of the space leased at our Manhattan and Suburban office properties, respectively, is expected to expire during 2015. Based on our estimates, the current market asking rents on all our Manhattan operating properties for leases that are expected to expire during 2015 would be approximately 42.3% higher than the existing in-place fully escalated rents while the current market asking rents on all our Manhattan opearting properties for leases that are scheduled to expire in future years would be approximately 10.4% higher than the existing in-place fully escalated rents. Based on our estimates, the current market asking rents on all our Suburban opearting properties for leases that are expected to expire during 2015 would be approximately 2.5% lower than the existing in-place fully escalated rents while the current market asking rents on all our Suburban operating properties for leases that are scheduled to expire in future years would be approximately 3.2% higher than the existing in-place fully escalated rents.

Investment Income

Investment income decreased primarily as a result of a one-time recognition of unrecognized interest ($6.1 million) related to one of our preferred equity investments in 2013, and the redemption of one of our preferred equity investments in April 2014 ($1.2 million).

Other Income

Other income decreased primarily as a result of lower lease buy-out income ($0.9 million).

Property Operating Expenses

Property operating expenses increased primarily as a result of the acquisition of 315 West 33rd Street ($13.0 million) and 16 Court Street, Brooklyn ($1.5 million) and higher real estate taxes resulting from higher assessed values and tax rates from non-acquisition properties ($6.8 million).

Transaction Related Costs

Transaction related costs increased primarily as a result of higher investment activity during the year ended December 31, 2014.

Interest Expense and Amortization of Financing Costs, Net of Interest Income

Interest expense, net of interest income, decreased primarily as a result of the capitalization of interest relating to properties under development or redevelopment ($3.8 million) and the repayment of 5.875% senior notes in August 2014 ($1.7 million) and debt at 125 Park Avenue ($1.6 million) and 16 Court Street, Brooklyn ($1.2 million) in 2014. The decrease in interest expense was partially offset by higher interest as a result of increased borrowing on the 2012 credit facility ($6.1 million).

Depreciation and Amortization Expense

Depreciation and amortization increased primarily as a result of the acquisition of 315 West 33rd Street ($14.3 million) and 16 Court Street, Brooklyn ($1.6 million), partially offset by a one-time write off of tenant improvements and value for in-place leases associated with a former tenant ($4.7 million) in 2013.

Equity in Net Income from Unconsolidated Joint Venture

Equity in net income from unconsolidated joint venture decreased primarily as a result of the early redemption of the underlying preferred equity investment of our equity investment in 2013 ($3.9 million), partially offset by the origination of another investment accounted for under the equity method accounting as a result of meeting the criteria of a real estate investment under the guidance for Acquisition, Development and Construction arrangements in March 2014 ($2.8 million).

Loss on Early Extinguishment of Debt

Loss on early extinguishment of debt increased primarily as a result of the early repayment of debt at 625 Madison Avenue ($6.9 million) and 16 Court Street, Brooklyn ($0.5 million).

Discontinued Operations

Discontinued operations for the year ended December 31, 2014 includes the gain recognized on the sale of 673 First Avenue ($117.6 million) and the results of its operations. Discontinued operations for the year ended December, 2013 includes the gain recognized on the sale of 333 West 34th Street ($13.8 million). Prior period's results of operations of these sold properties were included in the net income from discontinued operations to conform to the current presentation.

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Comparison of the year ended December 31, 2013 to the year ended December 31, 2012

The following section compares the results of operations for the year ended December 31, 2013 to the year ended December 31, 2012 for the 34 properties owned by ROP at December 31, 2013. Acquisition properties represent properties acquired in 2013 or 2012 and properties transferred to us by SL Green following its acquisition. Any assets sold or held for sale are excluded from income from continuing operations.



(in thousands)	2013			2012			$ Change			% Change
Rental revenue, net	$	508,708		$	473,849		$	34,859		7.4	%
Escalation and reimbursement	84,235			80,707			3,528			4.4	%
Investment income	43,226			9,497			33,729			355.2	%
Other income	4,738			6,798			(2,060		)	(30.3	)%
Total revenues	$	640,907		$	570,851		$	70,056		12.3	%

Property operating expenses	267,786			247,528			20,258			8.2	%
Loan loss reserves, net of recoveries	—			(472		)	472			(100.0	)%
Transaction related costs	2,032			2,530			(498		)	(19.7	)%
Marketing, general and administrative	354			339			15			4.4	%
	270,172			249,925			20,247			8.1	%

Net operating income	370,735			320,926			49,809			15.5	%

Interest expense and amortization of financing costs, net of interest income	(129,422		)	(126,488		)	(2,934		)	2.3	%
Depreciation and amortization	(177,127		)	(154,753		)	(22,374		)	14.5	%
Equity in net income from unconsolidated joint venture	3,942			966			2,976			308.1	%
Equity in net gain on sale of interest in unconsolidated joint venture	—			1,001			(1,001		)	(100.0	)%
Loss on early extinguishment of debt	(76		)	(6,904		)	6,828			(98.9	)%
Income from continuing operations	68,052			34,748			33,304			95.8	%
Net income from discontinued operations	5,907			5,703			204			3.6	%
Gain on sale of discontinued operations	13,756			—			13,756			100.0	%
Net income	$	87,715		$	40,451		$	47,264		116.8	%

Rental, Escalation and Reimbursement Revenues

Rental revenue increased primarily as a result of the acquisitions of 131-137 Spring Street in December 2012 ($9.7 million), 641 Sixth Avenue in September 2012 ($8.1 million), 16 Court Street, Brooklyn in April 2013 ($6.8 million), 304 Park Avenue South in June 2012 ($4.8 million) and 315 West 33rd Street in November 2013 ($3.4 million), partially offset by a one-time write-off of value for above-market leases associated with a former tenant ($6.8 million) in 2013.

Escalation and reimbursement revenue increased primarily as a result of higher real estate tax recoveries from non-acquisition properties ($1.8 million) and the acquisitions of 16 Court Street, Brooklyn ($1.1 million), 641 Sixth Avenue ($0.7 million), 315 West 33rd Street ($0.6 million), 131-137 Spring Street ($0.4 million) and 304 Park Avenue South ($0.4 million), partially offset by lower electric reimbursements ($1.9 million) from non-acquisition properties.

Occupancy in our Manhattan office properties was 93.2% at December 31, 2013 compared to 93.7% at December 31, 2012. Occupancy in our Suburban office properties was 78.3% at December 31, 2013 compared to 77.4% at December 31, 2012. At December 31, 2013, excluding the impact of the five properties transferred in 2014, approximately 4.3% and 7.8% of the space leased at our Manhattan and Suburban office properties, respectively, were expected to expire during 2014. Based on our estimates, the current market asking rents on all our Manhattan operating properties for leases that expired during 2014 would be approximately 15.3% higher than the existing in-place fully escalated rents while the current market asking rents on all our Manhattan operating properties for leases that are scheduled to expire in future years would be approximately 10.4% higher than the existing in-place fully escalated rents. Based on our estimates, the current market rents on all our Suburban operating properties for leases that expired during 2014 would be approximately 7.3% lower than the existing in-place fully escalated rents while the current market rents on all our Suburban operating properties for leases that were scheduled to expire in future years would be approximately 3.1% higher than the existing in-place fully escalated rents.

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Investment Income

Investment income increased primarily as a result of the preferred equity investments that were transferred to us by SL Green in September 2012 ($33.7 million).

Other Income

Other income decreased primarily as a result of real estate tax refunds in 2012 ($1.1 million) and lower lease buy-out income ($0.7 million).

Property Operating Expenses

Property operating expenses increased primarily as a result of higher real estate taxes resulting from higher assessed values and tax rates ($4.5 million) from non-acquisition properties, the acquisitions of 16 Court Street, Brooklyn ($4.2 million), 641 Sixth Avenue ($3.0 million), 304 Park Avenue South ($2.2 million), 315 West 33rd Street ($1.8 million), and 131-137 Spring Street ($1.3 million), increased payroll costs ($1.6 million), professional fees ($0.5 million), contract maintenance ($0.5 million), and repairs and maintenance ($0.4 million) from non-acquisition properties, partially offset by lower utility expenses ($1.0 million).

Interest Expense and Amortization of Financing Costs, Net of Interest Income

Interest expense and amortization of financing costs, net of interest income increased primarily as a result of the issuance of a $200.0 million aggregate principal amount of 4.5% senior notes due 2022 in November 2012 ($8.1 million), the assumption of the $50.0 million loan ($3.1 million), and new financing at 16 Court Street, Brooklyn ($2.0 million), partially offset by the repayment of debt at 609 Fifth Avenue ($6.2 million) and 110 East 42nd Street ($3.7 million) in December 2012.

Depreciation and Amortization Expense

Depreciation and amortization expense increased primarily as a result of the acquisitions of 131-137 Spring Street ($5.3 million), 16 Court Street, Brooklyn ($3.2 million), 304 Park Avenue South ($2.1 million), 315 West 33rd Street ($0.9 million) and 641 Sixth Avenue ($0.6 million) and a one-time write-off of tenant improvements and value for in-place leases associated with a former tenant ($4.7 million) in 2013. The remaining increase primarily resulting from increased capital expenditures at the non-acquisition properties.

Equity in Net Income from Unconsolidated Joint Venture

Equity in net income from unconsolidated joint venture increased primarily as a result of the early redemption of the underlying preferred equity investment of our equity investment in 2013.

Equity in Net Gain on Sale of Interest in Unconsolidated Joint Venture/Real Estate

During the year ended December 31, 2012, we recognized a gain from the sale of One Court Square ($1.0 million).

Loss on Early Extinguishment of Debt

Loss on early extinguishment of debt decreased primarily as a result of the repurchase of senior unsecured notes ($3.8 million) and the repayment of debt in relation to 609 Fifth Avenue ($3.1 million) in 2012.

Discontinued Operations

Discontinued operations for the year ended December 31, 2013 included the gain on sale recognized for 333 West 34th Street ($13.8 million), which closed in August 2013, as well as the results of operations of all sold properties as of December 31, 2014. Prior year's results of operations were reclassified to discontinued operations to conform with the current presentation.

Liquidity and Capital Resources

On January 25, 2007, we were acquired by SL Green. See Item 7 "Management's Discussion and Analysis Liquidity and Capital Resources" in SL Green and the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 2014 for a complete discussion of additional sources of liquidity available to us due to our indirect ownership by SL Green.

We currently expect that our principal sources of funds to meet our short-term and long-term liquidity requirements for working capital and funds for acquisition and development or redevelopment of properties, tenant improvements, leasing costs, repurchases or repayments of outstanding indebtedness (which may include exchangeable debt) and for preferred equity investments will include:


(1)	cash flow from operations;


(2)	cash on hand;


(3)	borrowings under the 2012 credit facility;


(4)	other forms of secured or unsecured financing;

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(5)	net proceeds from divestitures of properties and redemptions, participations and dispositions of preferred equity investments; and


(6)	proceeds from debt offerings by us.

Cash flow from operations is primarily dependent upon the occupancy level of our portfolio, the net effective rental rates achieved on our leases, the collectability of rent, operating escalations and recoveries from our tenants and the level of operating and other costs. Additionally, we believe that our preferred equity investment program will continue to serve as a source of operating cash flow.

We believe that our sources of working capital, specifically our cash flow from operations and SL Green's liquidity are adequate for us to meet our short-term and long-term liquidity requirements for the foreseeable future.

Cash Flows

The following summary discussion of our cash flows is based on our consolidated statements of cash flows in "Item 8. Financial Statements" and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.

Cash and cash equivalents were $33.9 million and $45.9 million at December 31, 2014 and 2013, respectively, representing a decrease of $12.0 million. The decrease was a result of the following changes in cash flows (in thousands):



	Year ended December 31,
	2014			2013			Increase (Decrease)
Net cash provided by operating activities	$	179,244		$	158,244		$	21,000
Net cash provided by (used in) investing activities	$	20,923		$	(277,327	)	$	298,250
Net cash (used in) provided by financing activities	$	(212,076	)	$	130,904		$	(342,980	)

Our principal source of operating cash flow is related to the leasing and operating of the properties in our portfolio. Our properties provide a relatively consistent stream of cash flow that provides us with resources to pay operating expenses, debt service and make distributions to SL Green. At December 31, 2014, our operating portfolio was 89.0% occupied. Our preferred investments also provide a steady stream of operating cash flow to us.

Cash is used in investing activities to fund acquisitions, development or redevelopment projects and recurring and nonrecurring capital expenditures. We selectively invest in new projects that enable us to take advantage of our development, leasing, financing and property management skills and invest in existing buildings that meet our investment criteria. During the year ended December 31, 2014, when compared to the year ended December 31, 2013, we used cash primarily for the following investing activities (in thousands):



Acquisitions of real estate	$	151,655
Capital expenditures and capitalized interest	89
Net proceeds from sale of real estate/joint venture interest	(73,989		)
Distributions from unconsolidated joint ventures	(19,926		)
Repayment or redemption of preferred equity and other investments, net of originations or investments	239,278
Restricted cash—capital improvements	1,143
Increase in net cash provided by investing activities	$	298,250

Funds spent on capital expenditures, which comprise building and tenant improvements, decreased from $95.0 million for the year ended December 31, 2013 compared to $94.9 million for the year ended December 31, 2014. The decrease in capital expenditures relate primarily to lower costs incurred in connection with the redevelopment of a property and the build-out of space for tenants resulting from new leasing activity.

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We generally fund our investment activity through property-level financing, our 2012 credit facility, senior unsecured notes and sale of real estate. During the year ended December 31, 2014, when compared to the year ended December 31, 2013, we used cash for the following financing activities (in thousands):



Repayments under our debt obligations	$	(764,804	)
Proceeds from debt obligations	744,062
Contributions from common unitholder	204,081
Distributions to common unitholder and noncontrolling interests	(523,486		)
Deferred loan costs	(2,833		)
Increase in cash used in financing activities	$	(342,980	)

Capitalization

All of our issued and outstanding Class A common units are owned by WAGP or the Operating Partnership.

Corporate Indebtedness

2012 Credit Facility

In March 2014, we entered into an amendment to the $1.6 billion credit facility entered into by the Company in November 2012, or the 2012 credit facility, which among other things, increased the term loan portion of the facility by $383.0 million to $783.0 million, decreased the interest-rate margin applicable to the term loan portion of the facility by 25 basis points and extended the maturity of the term loan portion of the facility from March 30, 2018 to June 30, 2019. In November 2014, we increased the term loan portion of the facility by $50.0 million to $833.0 million. As of December 31, 2014, the 2012 credit facility, as amended, consists of a $1.2 billion revolving credit facility, or the revolving credit facility, and an $833.0 million term loan, or the term loan facility. In January 2015, we entered into a second amended and restated credit agreement, which decreased the interest-rate margin and facility fee applicable to the revolving credit facility by 20 basis points and five basis points, respectively, and extended the maturity date of the revolving credit facility to March 29, 2019 with an as-of-right extension through March 29, 2020. We also have an option, subject to customary conditions, without the consent of existing lenders, to increase the capacity under the revolving credit facility to $1.5 billion at any time prior to the maturity date for the revolving credit facility, by obtaining additional commitments from our existing lenders and other financial institutions.

As of December 31, 2014, the 2012 credit facility bore interest at a spread over LIBOR ranging from (i) 100 basis points to 175 basis points for loans under the revolving credit facility and (ii) 95 basis points to 190 basis points for loans under the term loan facility, in each case based on the credit rating assigned to the senior unsecured long term indebtedness of ROP. At December 31, 2014, the applicable spread was 145 basis points for revolving credit facility and 140 basis points for the term loan facility. At December 31, 2014, the effective interest rate was 1.61% for the revolving credit facility and 1.67% for the term loan facility. We are required to pay quarterly in arrears a 15 to 35 basis point facility fee on the total commitments under the revolving credit facility based on the credit rating assigned to the senior unsecured long term indebtedness the Company. As of December 31, 2014, the facility fee was 30 basis points. As of December 31, 2014, we had $113.2 million of outstanding letters of credit, $385.0 million drawn under the revolving credit facility and $833.0 million outstanding under the term loan facility, with total undrawn capacity of $701.8 million under the 2012 credit facility.

In connection with the amendment of the 2012 credit facility, we incurred debt origination and other loan costs of $3.0 million. We evaluated the modification pursuant to ASC 470 and determined that the terms of the amendment were not substantially different from the terms of the previous 2012 credit facility. As a result, these deferred costs and the unamortized balance of the costs previously incurred are amortized through the extended maturity date of the term loan facility.

We, SL Green and the Operating Partnership are all borrowers jointly and severally obligated under the 2012 credit facility. None of SL Green's other subsidiaries are obligor under the 2012 credit facility.

The 2012 credit facility includes certain restrictions and covenants (see Restrictive Covenants below).

2011 Revolving Credit Facility

In November 2012, the 2012 credit facility replaced our $1.5 billion revolving credit facility, or the 2011 revolving credit facility, which was terminated concurrently with the entering into the 2012 credit facility. The 2011 revolving credit facility bore interest at a spread over LIBOR ranging from 100 basis points to 185 basis points, based on the credit rating assigned to the senior unsecured long-term indebtedness of ROP, and required to pay quarterly in arrears a 17.5 to 45 basis point facility fee on the total commitments under the 2011 revolving credit facility.

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Senior Unsecured Notes

The following table sets forth our senior unsecured notes and other related disclosures as of December 31, 2014 and 2013, by scheduled maturity date (amounts in thousands):



Issuance	December 31, 2014 Unpaid Principal Balance		December 31, 2014 Accreted Balance		December 31, 2013 Accreted Balance		Coupon Rate⁽¹⁾	Effective Rate	Term (in Years)	Maturity
March 31, 2006	$	255,308	$	255,250	$	255,206